Caesars bankruptcy may hinge on releasing inquiry results, judge says
CHICAGO — A U.S. judge has opened the door to dismissing the $18 billion Caesars bankruptcy case unless parties find a way to make public results of an inquiry into whether the casino operator transferred its most profitable properties to new owners before filing to reorganize under Chapter 11.
If Caesars insists that the report remain sealed, U.S. Bankruptcy Judge Benjamin Goldgar said Wednesday he might dismiss the bankruptcy case, or convert it from Chapter 11 reorganization to a Chapter 7 liquidation "which would be a hoot."
In March, Goldgar ordered an independent investigation into creditor accusations that Caesars Entertainment Corp had stripped its casino operating unit of its best assets.
As the investigation nears its close, a lawyer for examiner Richard Davis said in court on Wednesday that Caesars and its unit had asked for the report, which contains some 7 million pages, to be filed under seal. Goldgar was furious.
"You can't have a bankruptcy process dependent on an examiner's report (...) on the theory that the report will then allow everyone to walk away smiling and holding hands and then object to it ever being released," Goldgar said.
He agreed to allow a redacted version of the report, which could be ready by the end of February, to be filed temporarily alongside a public summary, but told the examiner to go back to the drawing board for a procedure to release the full report.
Junior bondholders allege that the pre-bankruptcy transfer of valuable casinos and properties was designed to create a "good Caesars" that would keep returning profits to its private equity owners and a "bad Caesars" that was doomed to bankruptcy. Caesars has denied the allegations.
The examiner's report is considered a major hurdle for Caesars to gain the support of bitter bondholders for its restructuring plan, which envisions splitting the bankrupt unit into a casino operator and a property company.
So far, holders of about $12 billion, or two-thirds, of first-lien bank and bond debt, have signed on to the plan.Caesars has said it would seek court approval of its bankruptcy plan 60 days after the filing of the examiner's report.
